U.S. Supreme Court, Kousisis v. United States, Docket No. 23-909

Wire Fraud and Conspiracy to Commit the Same (18 U. S. C. §§1343, 1349)

 

Fraudulent-Inducement Theory

 

Circuit Split

 

 

 

 

The Government charged Alpha and Kousisis with wire fraud, asserting that they had fraudulently induced PennDOT to award them the painting contracts. See 18 U. S. C. §1343. Under the fraudulent-inducement theory, a defendant commits federal fraud whenever he uses a material misstatement to trick a victim into a contract that requires handing over her money or property—regardless of whether the fraudster, who often provides something in return, seeks to cause the victim net pecuniary loss. We must decide whether this theory is consistent with §1343, which reaches only those schemes that target traditional money or property interests. See Ciminelli v. United States, 598 U. S. 306, 316 (2023). It is, so we affirm.

 

The circuits are divided over the validity of a federal fraud conviction when the defendant did not seek to cause the victim net pecuniary loss. Several circuits, now including the Third, hold that such convictions may stand. See, e.g., id., at 240–244; United States v. Leahy, 464 F. 3d 773, 787–789 (CA7 2006); United States v. Granberry, 908 F. 2d 278, 280 (CA8 1990); United States v. Richter, 796 F. 3d 1173, 1192 (CA10 2015). Others disagree. See, e.g., United States v. Shellef, 507 F. 3d 82, 108–109 (CA2 2007); United States v. Sadlar, 750 F. 3d 585, 590–592 (CA6 2014); United States v. Bruchhausen, 977 F. 2d 464, 467–468 (CA9 1992); United States v. Takhalov, 827 F. 3d 1307, 1312–1314 (CA11 2016); United States v. Guertin, 67 F. 4th 445, 450–452 (CADC 2023). We granted certiorari to resolve the split. 602 U. S. ___ (2024).

 

(…) The money-or-property requirement lies at the heart of this dispute. Although the lower courts once interpreted the phrase “money or property” as something of a catchall, we recently reiterated that the federal fraud statutes reach only “traditional property interests.” Ciminelli, 598 U. S., at 316. Schemes that target the exercise of the Government’s regulatory power, for example, do not count. See Kelly, 590 U. S., at 400; see also Cleveland v. United States, 531 U. S. 12, 23–24 (2000). Nor do schemes that seek to deprive another of “intangible interests unconnected to property.” Ciminelli, 598 U. S., at 315; see also McNally, 483 U. S., at 356. And in all cases, because money or property must be an object of the defendant’s fraud, the traditional property interest at issue “must play more than some bit part in a scheme.” Kelly, 590 U. S., at 402. Obtaining the victim’s money or property must have been the “aim,” not an “incidental byproduct,” of the defendant’s fraud. Id., at 402, 404.

 

 

 

 

(U.S. Supreme Court, May 22, 2025, Kousisis v. United States, Docket No. 23-909, J. Barrett)

U.S. Supreme Court, Kousisis v. United States, Docket No. 23-909

Fraud

 

Rescission of Contract

 

Common Law

 

 

 

When Congress uses a term with origins in the common law, we generally presume that the term “‘brings the old soil with it.’” Sekhar v. United States, 570 U. S. 729, 733 (2013). As petitioners note, we have long interpreted the statutory term “fraud” (and its variations) this way—that is, by reference to its common-law pedigree. See Neder v. United States, 527 U. S. 1, 21–22 (1999); Universal Health Services, Inc. v. United States ex rel. Escobar, 579 U. S. 176, 187 (2016) (“The term ‘fraudulent’ is a paradigmatic example of a statutory term that incorporates the common-law meaning of fraud”).

 

This old-soil principle applies, however, only to the extent that a common-law term has “‘accumulated a settled meaning.’” Neder, 527 U. S., at 21; Kemp v. United States, 596 U. S. 528, 539 (2022). So to show that economic loss is necessary to securing a federal fraud conviction, Alpha and Kousisis must show that such loss was “widely accepted” as a component of common-law fraud. Morissette v. United States, 342 U. S. 246, 263 (1952). They cannot.

 

At common law, “fraud” was a term with expansive reach. Rather than settle on a single form of liability, courts recognized at least three, and the particular elements and remedies turned on the nature of the plaintiff ’s alleged injury. To appreciate how the three forms differed, it may help to consider a variation of the facts here. Imagine that PennDOT discovered petitioners’ scheme soon after Alpha and Kousisis had begun work on the Girard Point and 30th Street projects. In such a circumstance, law and equity provided at least three avenues for relief: PennDOT could (1) seek to rescind the contracts; (2) refer the matter for indictment under the crime of false pretenses; or (3) bring a tort action against the fraudsters for the damages incurred. If PennDOT had wanted to rescind the fraud-infected contracts, most courts would historically have permitted it to do so even without a showing of economic loss. To obtain a rescission, PennDOT would have needed to establish only that it had “received property of a different character or condition than it was promised” (“although of equal value”) or, more relevant here, that the transaction had “proved to be less advantageous than as represented” (“although there was no actual loss”). W. Keeton, D. Dobbs, R. Keeton, & D. Owen, Prosser and Keeton on Law of Torts §110, p. 766 (5th ed. 1984) (Prosser & Keeton). Put differently, many courts would have awarded the equitable remedy of rescission simply because Alpha and Kousisis had tricked PennDOT into a bargain materially different from the one they had promised. See Hirschman v. Healy, 162 Minn. 328, 331, 202 N. W. 734, 735 (1925) (“It is to be noted that it was not indispensable to prove damages in dollars and cents to have cancellation or rescission of the contract and note for misrepresentations”); Williams v. Kerr, 152 Pa. 560, 565, 25 A. 618, 619 (1893); Spreckels v. Gorrill, 152 Cal. 383, 391, 92 P. 1011, 1015 (1907). To borrow a summary from Black (of Black’s Law Dictionary fame) many “decisions repudiated altogether a rule requiring a showing of actual damage.” 1 H. Black, Rescission of Contracts and Cancellation of Written Instruments §112, p. 314 (1916).

 

 

 

(U.S. Supreme Court, May 22, 2025, Kousisis v. United States, Docket No. 23-909, J. Barrett)

 

Delaware Supreme Court, In re Alexion Pharmaceuticals, Inc. Insurance Appeals, Docket No. 154, 2024 / 157, 2024

Insurance Law

 

Contract Interpretation

 

“Meaningful Linkage” Standard

 

Notice of Circumstances

 

 

 

In claims-made insurance programs, the notice of circumstances benefits the insured. See Restatement of the L. of Liab. Ins. § 33 (Am. L. Inst. 2019) (explaining that a “notice of circumstances” clause “provides policyholders the option to secure coverage under an existing claims-made policy for a legal action that may be brought in the future”).

 

 

In this insurance coverage dispute, the issue on appeal is whether a Securities and Exchange Commission investigation, disclosed to its insurers by Alexion Pharmaceuticals, Inc., is related to a later securities class action brought against the company and others. If related, the securities class action is covered by Alexion’s first insurance tower. If not, it is covered by the second tower. Applying the “meaningful linkage” standard, the Superior Court found that the two were unrelated and placed the securities class action coverage in the second insurance tower. We find, however, that the securities class action – in the words of the policy – arose out of the circumstances disclosed by Alexion to its first tower insurers. Coverage should have been placed in the first tower.

 

 

The facts are largely undisputed. Alexion Pharmaceuticals, Inc. develops therapies for people living with rare disorders. Alexion was insured under two claims-made director and officer (“D&O”) liability insurance programs covering different periods. The first program provided $85 million of coverage for claims made between June 27, 2014 and June 27, 2015 (“Tower 1”). The second program provided $105 million of coverage for claims made between June 27, 2015 and June 27, 2017 (“Tower 2”). The two towers consist largely of the same insurers located in the same coverage layers. Both towers are structured as ABC directors and officers policies covering securities claims against the company. Each tower is composed of a primary policy and follow-form excess policies.

 

 

(ABC policies contain three insuring agreements. Side A covers directors’ and officers’ liability not indemnified by the company. Side B reimburses the company for indemnifying its directors and officers. Side C covers securities claims against the company. See A54 (Chubb Tower 2 Policy at 1); see also A158 (Chubb Tower 1 Policy at 1).) (Fn. 2).

 

 

Both towers also contain the following relevant provisions (“Limit of Liability Provision” and “Notice Provision,” respectively):

 

 

(…)

 

 

NOTICE (…): If, during a Policy Period or, if elected, the Extended Reporting Period, the Insureds first become aware of facts or circumstances which may reasonably give rise to a future Claim covered under this Policy, and if the Insureds give written notice to the Insurer during the Policy Period or, if elected, the Extended Reporting Period, of the identity of the potential claimants; a description of the anticipated Wrongful Act allegations; the identity of the Insureds allegedly involved; the circumstances by which the Insureds first became aware of the facts  or circumstances; the consequences which have resulted or may result;  and the nature of the potential monetary damages and non-monetary relief; then any Claim which arises out of such Wrongful Act shall be deemed to have been first made at the time such written notice was received by the Insurer. No coverage is provided for fees, expenses and other costs incurred prior to the time such Wrongful Act results in a Claim.

 

 

On June 18, 2015, Alexion sent its Tower 1 insurers a notice (“2015 Notice”) disclosing Alexion’s receipt of the SEC Subpoena.

 

 

On December 29, 2016 – during the Tower 2 coverage period – Alexion stockholders filed a federal securities class action in the District of Connecticut (“Securities Class Action”). The stockholders alleged that Alexion and its directors and officers violated Sections 10(b) and 20(a) of the Exchange Act, as well as SEC Rule 10b-5. They cited a series of unethical and illegal sales and lobbying practices, including obtaining data from partner labs to identify potential customers, deploying extreme fear tactics to garner patients, and funding foreign organizations. They also alleged that, “despite Alexion’s efforts to cover up the Company’s misconduct, . . . the truth continued to slowly reveal itself” through partial disclosures.

 

 

On January 5, 2017, Alexion sent its Tower 2 insurers notice of the Securities Class Action (“2017 Notice”). Chubb, the primary insurer for both towers, initially accepted coverage for the Securities Class Action under Tower 2, but it laterreassigned coverage to Tower 1. Chubb justified the reassignment on the grounds that the Securities Class Action “arose from the circumstances and anticipated Wrongful Acts reported during the 2014–2015 Policy Period, as well as many of the same Wrongful Acts and Interrelated Wrongful Acts.” Chubb stated that the overlap included Alexion’s grant-making activities, its compliance with the FCPA, and its activities in Japan, Brazil, Turkey, and Russia.

 

 

On July 2, 2020, Alexion settled with the SEC for about $21.5 million (“SEC Settlement”). On September 12, 2023, Alexion settled the Securities Class Action for $125 million (“Securities Class Action Settlement”). Although the Securities Class Action Settlement exceeded  the coverage limits of each tower, Tower 2 provided $20 million more coverage than Tower 1. Thus, Alexion had an economic incentive to pursue coverage for the Securities Class Action under Tower 2. It demanded that the settlement be covered under Tower 2.

 

 

Alexion filed a coverage action in the Superior Court against Endurance, Hudson, Navigators, Old Republic, and Swiss Re. Alexion alleged that Endurance, Navigators, and Swiss Re (collectively, “Tower 2 Insurer Defendants”) breached their coverage contracts under the Tower 2 policies. Alexion also sought a declaratory judgment against these defendants that the Securities Class Action is a “claim” first made during the Tower 2 period. In the alternative, Alexion sought a declaratory judgment against Hudson and Old Republic that the Securities Class Action is a “claim” first made during the Tower 1 period.

 

 

Here, the policies’ relevant terms are unambiguous. Both towers contain a broad Notice Provision, which provides that “any Claim which arises out of any properly noticed Wrongful Act shall be deemed to have been first made at the time such written notice was received by the Insurer.” The Notice Provision is not limited to mature Claims like filed lawsuits. It includes a “notice of circumstances” where the insured can give notice when it “first becomes aware of facts or circumstances which may reasonably give rise to a future Claim” under the policy. In claims-made insurance programs, the notice of circumstances benefits the insured.  The insured can lock in existing insurance coverage for later related claims even though the facts and circumstances have yet to occur or might be somewhat different.

 

See Restatement of the L. of Liab. Ins. § 33 (Am. L. Inst. 2019) (explaining that a “notice of circumstances” clause “provides policyholders the option to secure coverage under an existing claims-made policy for a legal action that may be brought in the future”).

 

 

Under the Limit of Liability Provisions in both towers, “all Claims arising out of the same Wrongful Act and all Interrelated Wrongful Acts . . . shall be deemed to be one Claim . . . first made on the date the earliest of such Claims is first made . . .” In other words, all Claims arising out of a properly noticed Wrongful Act or Interrelated Wrongful Act are treated as a single Claim made on the earliest date the insurer received the insured’s written notice.

 

 

The parties do not dispute that Alexion’s 2015 Notice was proper under the Tower 1 policies. Rather, they dispute whether the Securities Class Action is a claim arising out of any Wrongful Acts or Interrelated Wrongful Acts disclosed by Alexion in the 2015 Notice. Tower 1’s Notice Provision language – “arises out of” – is undefined. Tower 2’s Prior Notice Exclusion language – “alleging,” “based upon,” “arising out of,” and attributable” – is also undefined. With no other textual evidence of the parties’ intent found in the policies, we interpret “arises out of,” and other  similar terms, as requiring some “meaningful linkage between the two conditions imposed in the contract.” Although these terms are “paradigmatically broad,” and we interpret them broadly, the linkage must be meaningful and not tangential. Thus, if the Securities Class Action is meaningfully linked to any Wrongful Act, including any Interrelated Wrongful Act, disclosed by Alexion in the 2015 Notice, the Securities Class Action is covered by Tower 1.

 

 

Upon de novo review, we find that the Securities Class Action is meaningfully linked to the wrongful acts disclosed in the 2015 Notice.  First, both involve the same alleged wrongdoing – Alexion’s grantmaking activities worldwide. The 2015 Notice disclosed that Alexion had received a SEC Subpoena “requesting information related to Alexion’s grant-making activities and compliance with the Foreign Corrupt Practices Act.” The 2015 Notice also disclosed that the SEC Subpoena sought information on Alexion’s activities, policies, and procedures worldwide, especially in Brazil, Japan, Russia, and Turkey.

 

 

Both the SEC investigation and the Securities Class Action involve the same underlying wrongful act – Alexion’s improper sales tactics worldwide, including its grantmaking efforts in Brazil and elsewhere.  Because both the SEC investigation and the Securities Class Action involve the same conduct, it does not matter whether the SEC and the stockholder plaintiffs are different parties, asserted different theories of liabilities, or sought different relief. It is the common underlying wrongful acts that control.

 

 

It is true that the SEC investigation and the Securities Class Action alleged non-identical time periods. But while not perfectly identical, they do meaningfully overlap.

 

 

Both investigations involved the same Wrongful Act – Alexion’s grantmaking activities. A meaningful linkage exists between the Securities Class Action and the SEC investigation as disclosed by Alexion in its 2015 Notice. Under the policies of both towers, the Securities Class Action claim is deemed to have been first made at the time the 2015 Notice was received by Chubb – during the Tower 1 coverage period. Therefore, coverage is under Tower 1. Applying the Prior Notice Exclusion provision of Tower 2, no coverage is available under Tower 2. The judgment of the Superior Court is reversed.

 

 

 

 

(Delaware Supreme Court, Feb. 4, 2025, In re Alexion Pharmaceuticals, Inc. Insurance Appeals, Docket No. 154, 2024 / 157, 2024)

U.S. Court of Appeals for the Fifth Circuit, A&T Maritime Logistics v. RLI Insurance Co., Docket No. 23-30078

 

Insurance Law

 

Admiralty & Maritime Law

 

Breach of the Prompt Notice Requirement

 

Louisiana Law

 

 

 

RLI was actually prejudiced by the delayed notice from both A&T Maritime and Alexis Marine, as the damage worsened over time and the opportunity to settle for a lower amount was lost.

 

 

 

Appeal from the United States District Court for the Eastern District of Louisiana - USDC No. 2:21-CV-476.

 

 

 

A&T Maritime Logistics, Inc. had an insurance contract with RLI Insurance Company and a bareboat charter agreement with Alexis Marine, L.L.C. While A&T Maritime was operating the M/V Uncle John (a vessel owned by Alexis Marine), the ship allided with an embankment. Thinking the damage to be minimal, A&T Maritime did not remedy the situation. After a lawsuit was filed, RLI was notified of the claim. A&T Maritime and Alexis Marine filed claims against RLI requesting defense and ongoing indemnification for defense costs. RLI denied coverage under the insurance contract. On summary judgment, the district court upheld the denial. Because RLI was actually prejudiced by the delayed notice of a possible claim, we affirm.

 

 

(“An allision is defined as the ‘running of one ship upon another that is stationary—distinguished from collision.’ A collision is defined as ‘the action or an instance of colliding, violent encounter, or forceful striking together typically by accident and so as to harm or impede.’ Therefore, an allision occurs when a ship strikes a stationary object while a collision involves two moving vessels or objects.” Trico Marine Assets Inc. v. Diamond B Marine Servs. Inc., 332 F.3d 779, 786 n.1 (5th Cir. 2003). Fn. 1).

 

 

On March 10, 2020, while A&T Maritime was operating the Uncle John in the course of its work for Russell Marine, the Uncle John struck an embankment. The embankment fronts Bayou Black and the Gulf Intracoastal Waterway in Houma, Louisiana. At the time of the allision, the embankment was a portion of property belonging to Mildred Dampeer. A&T Maritime took some pictures of the resulting damage, but A&T Maritime “did not consider the allision to be significant.” A&T Maritime’s owner, Tayhika Manuel, engaged in discussions with Dampeer about resolving the issue. As part of these talks, A&T Maritime offered to send a repairman and offered payment of $3,500. According to Manuel’s deposition, the $3,500 was an agreed-upon amount. Dampeer later testified that she did not and would not have agreed to accept $3,500. Regardless, no payment was actually made, and the matter was “forgotten about more or less over a period of time.” On August 30, 2020 (over five months after the allision), Dampeer sent a letter to Manuel and attached an inspection of the embankment. In the letter, Dampeer expressed her concern that the damage resulting from the allision was worsening. Further, she stated, “I know you said you didn’t want to involve your insurance company. So please respond so we can keep the damage from getting worse.” Still, no settlement was reached, and A&T Maritime states that “the matter dropped for [sic] A&T’s radar until A&T was served with a lawsuit.”

 

 

Robert Champagne III and Elizabeth Champagne bought the property at issue from Dampeer. Based on an assignment in the purchase agreement, the Champagnes filed a lawsuit against A&T Maritime and Alexis Marine in personam and against the Uncle John in rem on March 8, 2021. The Champagnes also successfully moved for the arrest of the Uncle John. Alexis Marine filed a crossclaim against A&T Maritime and a third-party demand against RLI. A&T Maritime similarly filed a crossclaim against RLI requesting defense, indemnity, and ongoing reimbursement for defense costs. RLI was not notified about the allision until the lawsuit had been filed by the Champagnes. Once notified of the lawsuit, RLI filed counterclaims against A&T Maritime, Alexis Marine, and the Uncle John, seeking a declaration that, under the insurance policy, RLI had no duties to those parties for the incident at issue in the case.

 

 

The Champagnes’ claims were settled on November 18, 2021, for a settlement amount of $200,000. Alexis Marine was the sole party in this lawsuit to fund the settlement agreement with the Champagnes. 

 

 

This is likely because Alexis Marine had the strongest incentive to settle the case. As the owner of the Uncle John, Alexis Marine was losing potential revenue while the vessel was under arrest (Fn. 4).

 

 

(…) RLI argued, among other things, that the Uncle John was not a covered vessel under the insurance policy because only the Uncle Blue was listed on the policy. The district court disagreed and concluded that A&T Maritime and Alexis Marine correctly relied on the policy’s automatic attachment clause for coverage of the Uncle John.

 

 

Federal law generally “governs the interpretation of a policy of marine insurance.” Elevating Boats, Inc. v. Gulf Coast Marine, Inc., 766 F.2d 195, 198 (5th Cir. 1985). If there is no federal statute or general maritime law on an issue, “the law of the state where the marine insurance contract was issued and delivered is the governing law.” Id. The parties agree that Louisiana law, which requires an insurer to demonstrate actual prejudice resulting from delayed notice before it can deny coverage on that ground, provides supplemental rules of decision here. See id. (applying the Louisiana rule).

“Where the requirement of timely notice is not an express condition precedent,” to deny coverage based on late notice, “the insurer must demonstrate that it was sufficiently prejudiced by the insured’s late notice.” Peavey Co. v. M/V ANPA 971 F.2d 1168, 1173 (5th Cir. 1992); see also Elevating Boats, 766 F.2d at 198 (stating that under Louisiana law, “an insurer must demonstrate that an insured's failure to comply with a notice of claim or proof of loss provision actually prejudiced its interest" before it can deny coverage under the policy).

(…) Elevating Boats, 766 F.2d 195. In that case, the insurer was not notified of the potential claim until two weeks before trial. Id. at 198. We held that this delay was prejudicial for three independent reasons. Id. at 199–200. First, the insurer lost the opportunity to negotiate a settlement.  Id. at 199. Second, the insurer was deprived of the chance to make a third-party demand. Id. at 199–200. Third, the insurer was denied “the basic opportunity to investigate adequately the facts and circumstances surrounding the accident.” Id. at 200.

 

The reasoning of Elevating Boats does not turn on the stage of litigation at which notice is given to the insurer. Instead, we simply evaluated whether the delay in notice prejudiced the insurer. Thus, A&T Maritime cannot merely point to earlier notice than that in Elevating Boats to make a successful argument.

(U.S. Court of Appeals for the Fifth Circuit, Feb. 4, 2025, A&T Maritime Logistics v. RLI Insurance Co., Docket No. 23-30078)

Supreme Court of Texas, The Ohio Casualty Insurance Company v. Patterson-UTI Energy, Inc.; and Marsh USA, Inc., Docket No. 23-0006

Insurance Law

 

Interpretation of an Excess-Insurance Policy

 

Do We Look to the Underlying Policy?

 

Texas Law

 

 

 

On Petition for Review from the Court of Appeals for the Fourteenth District of Texas

 

 

We must decide whether the excess-insurance policy in this case covers the insured’s legal-defense expenses. Excess policies provide coverage that becomes available when an underlying insurance policy’s limits have been exhausted. Logically enough, therefore, the underlying policy often features prominently in excess-coverage disputes, especially when the excess policy is a “follow-form” contract—one that can be shorter and simpler than the underlying policy because it embraces many of the underlying policy’s terms. But even for follow-form excess policies, the contract that governs a dispute about excess coverage is the excess policy, not the underlying policy. As in any contractual case, therefore, we begin with the excess policy’s text and look to the underlying policy only to the extent that the parties consented to incorporate its terms. The court of appeals inverted this process: “We start from the ground up, first examining the terms of the underlying policy and then looking to the excess policy to determine coverage.” 656 S.W.3d 729, 734 (Tex. App.—Houston [14th Dist.] 2022). This mistaken approach led to an erroneous result: while the underlying policy covered the insured’s defense expenses, the excess policy does not. We therefore reverse the court of appeals’ judgment, render judgment in part, and remand to the trial court for further proceedings.

 

 

Each year, Patterson buys insurance to protect itself from costs arising from any incident that might occur during drilling operations involving its rigs. Patterson covers its risk by building an “insurance tower,” which consists of a primary policy that underlies multiple layers of excess coverage. For the 2017–2018 policy year, Patterson bought several lines of insurance through its broker, respondent Marsh USA, Inc. One of those lines—the “underlying policy” in this case—was an umbrella policy from Liberty Mutual Insurance Europe, Ltd. Patterson also obtained various additional excess policies through Marsh, including the one from Ohio Casualty at issue here.

 

 

(…) Patterson then sued Ohio Casualty and Marsh. In its live petition, Patterson alleged that Ohio Casualty’s refusal breached the contract and violated the Insurance Code. In the alternative (and assuming that the excess policy did not cover defense expenses), Patterson alleged that Marsh violated the Insurance Code and committed negligence, negligent misrepresentation, fraud, and breach of contract by failing to procure an insurance policy that did cover defense expenses.

 

 

The parties filed competing motions for summary judgment regarding whether the Ohio Casualty policy covers defense expenses. The trial court granted Patterson’s motion and denied Ohio Casualty’s. The court determined that “the defense costs sought by Patterson are covered under the Ohio Casualty policy at issue in this case because the Ohio Casualty policy did not clearly and unambiguously exclude the coverage for defense costs provided by the underlying primary policy.” To expedite resolution of the case, the parties jointly moved for entry of an agreed final judgment, which the trial court signed. Ohio Casualty appealed.

 

 

The court of appeals affirmed. It noted the parties’ agreement that the underlying policy covers defense expenses. Id. at 734–35. The excess policy, the court then noted is a “follow form” policy that does not unambiguously exclude defense expenses. Id. at 735–37. Therefore, the court reasoned, the excess policy necessarily also covers those expenses. Id. at 738. We granted Ohio Casualty’s petition for review and now reverse.

 

 

“As early as 1886, this Court recognized as ‘a cardinal principle of...insurance law’ that ‘the policy is the contract; and if outside papers are to be imported into it, this must be done in so clear a manner as to leave no doubt of the intention of the parties.’”  ExxonMobil Corp. v. Nat’l Union Fire Ins. Co. of Pittsburgh, 672 S.W.3d 415, 418 (Tex. 2023) (quoting Goddard v. E. Tex. Fire Ins. Co., 1 S.W. 906, 907 (Tex. 1886)). In other words, “we begin with the text of the policy at issue; we refer to extrinsic documents only if that policy clearly requires doing so; and we refer to such extrinsic documents only to the extent of the incorporation and no further.” Id. at 418–19. We have applied this principle in the context of follow-form excess-insurance policies. See RSUI Indem. Co. v. Lynd Co., 466 S.W.3d 113, 118 (Tex. 2015).

 

 

At all times, the excess policy itself remains the contract that governs a dispute about its coverage. The court of appeals should have first “looked to the excess policy to determine coverage” rather than “first examining the terms of the underlying policy.” 656 S.W.3d at 734.

 

 

(…) “damages”—a term that, without more, does not include defense expenses. See Corral-Lerma, 451 S.W.3d at 387.

 

 

In other words, the excess policy confines its coverage to sums paid to an adverse party, like the personal-injury claimants who sued Patterson after the drilling-rig incident. Cf. In re Farmers Tex. County Mut. Ins. Co., 621 S.W.3d 261, 270–71 (Tex. 2021) (stating that either a judgment or a settlement may trigger a duty to indemnify). Attorney’s fees could fall within that scope. For example, if a fee-shifting statute led to a judgment requiring Patterson to pay the adverse party’s attorney’s fees, Ohio Casualty would presumably be obligated to indemnify Patterson for that amount because Patterson would be legally obligated to pay it as part of the satisfaction of a claim. But the excess policy does not cover fees that Patterson paid its own attorneys.

 

 

 

 

 

 

 

(Supreme Court of Texas, Dec. 20, 2024, The Ohio Casualty Insurance Company v. Patterson-UTI Energy, Inc.; and Marsh USA, Inc., Docket No. 23-0006)

Supreme Court of Texas, The Ohio Casualty Insurance Company v. Patterson-UTI Energy, Inc.; and Marsh USA, Inc., Docket No. 23-0006

Interpretation of Legal Texts

 

Surplusage Canon

 

Texas Law

 

 

 

 

The surplusage canon “has its exceptions.” Whole Woman’s Health v. Jackson, 642 S.W.3d 569, 581 (Tex. 2022). “Like all canons of construction, the surplusage canon ‘must be applied with judgment and discretion, and with careful regard to context.’” Id. at 582 (quoting Antonin Scalia & Bryan A. Garner, Reading Law: The Interpretation of Legal Texts 176–77 (2012). And “we have repeatedly recognized, when faced with legal language that appears repetitive or otherwise unnecessary, that drafters often include redundant language to illustrate or emphasize their intent.” Id. For example, in Philadelphia Indemnity Insurance Co. v. White, the tenant pointed out “an apparent redundancy” in a lease. 490 S.W.3d 468, 477 (Tex. 2016). The lease included “catchall” language providing that the tenant would be responsible for losses not caused by the landlord’s negligence or fault but also specifically provided that the tenant would be responsible for particular types of damage. Id. We noted that “though we strive to construe contracts in a manner that avoids rendering any language superfluous, redundancies may be used for clarity, emphasis, or both.” Id.

 

 

 

 

(Supreme Court of Texas, Dec. 20, 2024, The Ohio Casualty Insurance Company v. Patterson-UTI Energy, Inc.; and Marsh USA, Inc., Docket No. 23-0006)

 

 

 

California Court of Appeal, Yaffee v. Skeen, Docket No. C097746

Hospital Lien Act (HLA)

 

Lien Upon the Damages Recovered

 

Workers’ Compensation

 

California Law

 

 

 

 

With the HLA, “the Legislature established one mechanism through which hospitals that provide emergency services can recoup costs from an entity other than a patient’s health care service plan.” (Dameron Hospital Assn. v. AAA Northern California, Nevada & Utah Ins. Exchange (2022) 77 Cal.App.5th 971, 985.) Section 3045.1 states, every person or entity “maintaining a hospital licensed under the laws of this state which furnishes emergency and ongoing medical or other services to any person injured by reason of an accident or negligent or other wrongful act not covered by workers’ compensation shall, if the person has a claim against another for damages on account of his or her injuries, have a lien upon the damages recovered, or to be recovered, by the person... to the extent of the amount of the reasonable and necessary charges of the hospital and any hospital affiliated health facility, as defined in Section 1250 of the Health and Safety Code, in which services are provided for the treatment, care, and maintenance of the person in the hospital or health facility affiliated with the hospital resulting from that accident or negligent or other wrongful act.”

 

 

When a hospital receives payment from a patient and his health insurer at a reduced negotiated rate under a prior agreement in which the hospital agreed to accept that payment as “payment in full” for its services, the hospital cannot assert a lien under the HLA to “recover the difference between its usual and customary charges and the amount received from the patient and his insurer.” (Parnell, supra, 35 Cal.4th at p. 598.) (Parnell v. Adventist Health System/West (2005) 35 Cal.4th 595, 604.) However if, “hospitals wish to preserve their right to recover the difference between usual and customary charges and the negotiated rate through a lien under the HLA, they are free to contract for this right” when negotiating their contracts with insurers. (Dameron Hospital Assn. v. AAA Northern California, Nevada & Utah Ins. Exchange (2014) 229 Cal.App.4th 549, 554.)

 

 

We agree with defendants that the plain language of section 3045.1 requires a hospital to provide emergency services before the hospital can assert a lien under the HLA, and to the extent the trial court found otherwise, it erred.

 

 

(…) Thus, the Legislature contemplated the amendments would cover nonemergency services that flow from the provision of emergency services when patients remain in the hospital.

 

 

(…) The issue in Parnell was whether a hospital could assert a lien under the HLA to recover the difference between its usual and customary charges and the amount received from a patient and its insurer when the hospital had agreed to accept the amount the patient and insurer paid as “payment in full” for its services. (Id. at p.598.) Our Supreme Court concluded the hospital could not. (Ibid.)

 

 

 

 

 

(California Court of Appeal, Dec. 17, 2024, Yaffee v. Skeen, Docket No. C097746, Certified for Publication)